The Dirty Little Secret of Listing Agents

The Dirty Little Secret of Listing Agents

Joe and Carol Minter were thinking of selling their home. They had raised their family in the comfortable 4 bedroom, 3 bathroom ranch that they purchased in 1984 for $180,000. As a young couple, that had seemed like a fortune to them at the time and they had saved scrupulously for years to buy the only home they thought they would ever own. Now, 34 years later, their kids grown and through college, they saw homes in their neighborhood selling for over a million dollars and they were shocked and intrigued. Maybe they could take an early retirement or at least downsize and travel more. They decided to invite 2 local realtors over to look at their house and give them estimates of value.

The First Agent: An Experienced Realtor

The first agent, an experienced local Realtor, arrived on time and, after touring the house with both Joe and Carol – and asking lots of questions about the work they had done over the years – sat down with them and handed each a folder filled with papers. She explained that she had pulled comparable listings, both active and sold, in the immediate area and she went through each of those listings carefully pointing out the similarities and differences between the other homes and Joe and Carol’s. Based upon her research and after looking at their home, she felt that they could expect to receive somewhere in the neighborhood of $1.2 – $1.3MM for their home. Her listing commission was 5.5%, of which she would offer 2.5% to the selling broker and her firm would receive 3%. If she happened to represent both parties, she would reduce the commission to 5%, but she would not accept a dual agency without Joe and Carol’s prior permission. She suggested that they list the property for $1.249MM and she explained to them that she would work with them to help prep the house for listing and talked about a few suggestions that she had for updates or repairs. She left them with a listing agreement to review and promised to follow up to answer any questions they might have after they had had an opportunity to discuss everything.

The Second Agent: An Experienced Marketer

The second agent, a young man who had marketed heavily in the neighborhood over the past year, had asked if they were speaking to other agents and then insisted that they meet with him last. He arrived about 30 minutes late and quickly walked through the house. He sat down with the couple and immediately told them that he could get them the best price because he had attracted hundreds of buyers through social media marketing campaigns. Inventory was low, he told them, so they could demand top dollar for a home located in that neighborhood. His listing commission of 7% seemed steep to the Minters but he explained that he had to offset his substantial marketing costs, of which they were the beneficiaries. He pushed them to sign the listing agreement and they were tempted when he wrote in a list price of $1.4MM, higher than any of the homes in their neighborhood had yet sold for. At that price, the 7% commission would hardly make a dent in their net proceeds. Joe and Carol asked about comparable sales in the neighborhood, but the young man told them that was “old school thinking.” He assured them that his cutting edge sales and marketing methods were the wave of the future and he pressed them to sign the listing agreement. When they asked if he thought they should make any repairs or do any updates, he laughed. “I’m going to make this easy for you,” he said, tapping the paperwork and handing Joe a pen, “sign the listing agreement and let’s get this baby sold.”

Impressed, and a little cowed, by his salesmanship, the Minters signed the listing agreement with the young man. Smiling broadly, he took the paperwork, shook their hands, and said he’d be in touch as he left.

The Consequences Of A Bad Real Estate Agent

A month later, the young man called the Minters and said he was getting a lot of pushback from other agents on the price and he suggested they reduce it to $1.3MM. The Minters reluctantly agreed.Another month passed and the young man brought them an offer from a buyer for $1.15MM. Shocked, the Minters asked why the offer was $150,000 less than their reduced list price. The young man blithely told them that their house needed a lot of updating and this was an offer from a developer who planned to completely redo the house. He told them “your first offer is always your best offer and you should seriously consider accepting this.” He did not take any time to go through the offer with them and, as the Minters reviewed it more thoroughly, they realized that he was also representing the buyer. When they called him to ask if he would reduce his commission, he responded “that’s not how this works – you’ve owned this house for a long time and you’re making a lot of money on this sale, taking a few thousand dollars from my pocket should not make a difference for you.”

At this point, the Minters felt confused, frustrated and anxious – and with good reason. They had been persuaded by a salesman who was selling himself to them, not a professional who wanted to sell their home to someone else.

Unfortunately, this is not an unusual situation. The young agent in the above scenario was focused on marketing himself in a particular area. He insisted on being the last agent to be interviewed because he wanted to make an aggressive pitch for the listing and insist on signing the documents “in the heat of the moment.” The first agent, who was prepared, interested, experienced and honest lacked the “sizzle” of the second agent.

Unfortunately for the Minters and other sellers, an agent who is focused on selling themselves may not always be the best choice for selling your home. It’s a lesson worth remembering when you’re interviewing agents: good self-promotion is no substitute for experience and knowledge.